How cautious should the Red Sox be with their payroll?

The Red Sox made their first real move of the offseason on Monday in signing Mitch Moreland to a two-year, $13 million deal. We went in-depth on all of the pros and cons with this agreement earlier today, but today I want to focus solely on the money side of things. Really, I want to look at the Red Sox as a whole, not just the Moreland deal. Over the last few years, we’ve been a lot more conscience of Boston’s payroll, particularly in relation to the luxury tax threshold. In the new CBA, the Players Union were crushed in negotiations in this regard and the luxury tax is serving as something closer to a salary cap than ever before. For 2017, the goal was to stay under the luxury tax threshold, which has traditionally been (and always should be) unheard of in Boston. However, there are steeper penalties for repeat offenders. With that in mind, the team certainly isn’t avoiding that threshold this year. Below is a look at the team’s payroll as it stands right now.

As you can see, even without signing the big bat (*cough* J.D. Martinez *cough*) that everyone is expecting to see in Boston, the team is already about $12 million over the luxury tax threshold of $197 million. This is not patting them on the back, because this is really the bare-minimum payroll a team like the Red Sox should be sporting every year. However, there is a new barrier that teams need to be aware of under this new CBA that has never really been involved with the luxury tax before. Now, if a team exceeds the threshold by at least $40 million — so, this year that would mean spending more than $237 million -- they move back ten picks in June’s amateur draft. Every team is cognizant of this new rule, of course, and it seems the Red Sox are planning on avoiding these harsher penalties.

At first blush, it seems like it’s a very good thing that they are avoiding these kind of draft pick penalties. While it was always easy to say Red Sox ownership should have no problem simply paying the luxury tax rate — and that is still 100 percent true — it becomes a little more complicated when there are baseball consequences to spending too much money. Putting aside my opinions of the new rules — it’s dumb and bullshit — they exist and the Red Sox need to decide how to handle it. The general consensus seems to be that this should be avoided, and I agreed at the outset. However, the more I think about it the more I believe it’s not something the team should let get in the way of really improving the team.

Don’t get me wrong here, I understand the reason people are wary of sacrificing draft position for a higher payroll. It’s particularly frightening for a Red Sox team that could really use some new talent coming into its farm system. However, given the expectations for this team in both 2018 and the next few years after that, I’m not sure moving back ten picks is that big of a sacrifice. For example, let’s look at the upcoming draft as an example. This coming June, Boston will be picking 26th in the draft. If they had to pay these penalties, they would be moving back to the 36th pick. Is that really that much of a penalty?

Baseball America releases their 2018 top 10 Red Sox prospects

In terms of expected value from the pick, there really is not a very big difference between the 26th overall pick the and the 36th. Moving back from the top of the draft can have a significant impact, but the further you get from the first overall pick, the less of an impact each individual draft slot can expect. This post is from 2014, but the same principal still applies today. In this study, the average WAR from the 26-30 pick range in the players’ pre-free agency years was 2.8 The average WAR from the 36-40 pick range was 2.4. That, of course, is a marginal difference.

Baseball’s draft is different than other sports in that draft position isn’t just about the type of player one can acquire, though. Moving back ten spots in the draft doesn’t just mean that you have to wait out ten more teams before you make your pick, but also that you have less money to put towards draft picks. Slot money is the most important asset on draft day and can affect your entire class. When you’re picking in the back of the first round, though, moving back ten picks isn’t detrimental to draft slot. For example, the Red Sox picked 24th in this past summer’s draft, and if they had moved back ten picks they would have lost $700,000 in draft money. That’s not an insignificant amount of money, but it’s also not a total back-breaker.

After looking at all of this, I’ve come to the conclusion that this penalty isn’t quite as bad as people have made it out to be. Of course, this is all dependent on the team being good enough to pick in the back of the first round. The clear risk is that the team disappoints and all of a sudden you move from the tenth pick to the twentieth, which is a much more significant penalty. (It should be mentioned that if your pick falls in the top six overall, it’s your second pick that gets moved back.) The Red Sox have a good team, though, and I’d be surprised if they weren’t at least in the top-third of the league by the end of the year. While suffering this penalty isn’t something I’d be making a habit of, moving back ten spots in the draft isn’t something that should prevent this team from making a move that they believe could put them over the top. Whether that means signing a free agent, trading for salary or signing a key player to an extension, the Red Sox’ number one priority should be putting a winner on the field right now.